Five former executives at Brooke Corp, which franchised insurance agencies and made loans to its franchisees, settled US regulatory charges that they fraudulently hid worsening finances that led to the company''s bankruptcy and the failure of several regional banks.
The US Securities and Exchange Commission said on Wednesday the executives used "virtually any means necessary" in 2007 and 2008 to hide Brooke''s condition, including its "almost weekly" liquidity crises and fast-deteriorating loan quality. Two affiliates, Brooke Capital Corp and Aleritas Capital Corp, were publicly traded, and loan losses of hundreds of millions of dollars by Aleritas caused the bank failures, the SEC said in a complaint filed in Kansas City, Kansas, federal court.
One of Aleritas'' biggest lenders obtained funds from the US Treasury Department''s Troubled Asset Relief Program, the SEC added. "The fallout from their fraud had a devastating impact on the livelihood of hundreds of insurance franchisees that depended on Brooke and on the balance sheets of regional banks and other lenders," SEC enforcement chief Robert Khuzami said in a statement.
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